Taiwan President Lee Tung-hui in 1996. (AFP)

(Updated: July 1999)
Having been defeated by the Communists, General Chaing Kai-shek fled Mainland China in 1949 with some two million supporters and set up a provisional capital for his Kuomintang (KMT) government on the island of Formosa (Taiwan).

Under the new central government, Taiwan lived in a continuous state of martial law. Opposing parties were quickly outlawed and dissenting views were crushed as the general wielded virtually unlimited power in checking the Communist threat.

The state of military readiness and fear of a Mainland invasion would hardly ease in the 1950s. In 1954, China attacked the offshore island of Quemoy that Taiwan controlled. And in 1958, China launched another series of attacks on Quemoy and the island of Matsu. But after a number of bloody battles, the Mainland Chinese were forced to retreat.

"I don't see any high-level political dialogue [between Taiwan and China] in the foreseeable future . . . . Both sides still have suspicions toward each other." – Andrew Yang, general secretary of the Center for Advanced Policy Studies in Taiwan.

Relations between China and Taiwan continued to sour into the 1970s, as both fought over sovereignty issues. Both fought in diplomatic circles to be regarded as the one "true" China. In terms of international standing, Taiwan suffered the most. In 1971, the Republic of China was expelled from the United Nations; its seat given to the People's Republic of China. Then, in late 1978, the United States declared that it would establish ties instead with the Mainland, essentially dumping its diplomatic relations with the island.

Despite the setbacks, Taiwan made remarkable strides in other areas. By the 1980s, Taiwan transformed itself from a poor agricultural island to a leading manufacturing and industrial center, thanks to aid from the United States and a number of economic reforms.

Moreover, its political structure was also changing. With a relaxation of its control over political parties, the nation held its first two-party election in 1986. The following year, President Chaing Ching-kuo, son of former President Chaing Kai-shek, finally lifted martial law, paving the way for the termination of most restrictions on press and personal freedoms.

Democratization on the island continued with the death of Chaing Ching-kuo, and the elevation of Lee Teng-hui as president in 1988. Educated in the United States, Lee presided over several democratic reforms, including the provisions for direct popular elections for the national parliament, the provincial governor, Taipei and Kaohsiung mayors, and even president.

Economic and political reforms brought increased contact and trade between the Mainland and the island. By 1991, Taiwan had become the number one foreign investor in China. From 1993-95, Taiwan and the PRC established a dialogue channel and held a series of meetings to discuss practical issues such as immigration, fishing rights, and other territorial matters.

Despite the temporary warming of relations, incidents continued to provoke friction on both sides. In 1994, 24 Taiwanese tourists were found massacred at a scenic lake in Hangchow, China – an event that led Taiwan to suspend group tours and cultural exchanges to China. In 1995, after President Lee's visit to the United States, China broke off bilateral talks with the island and later test-fired missiles into the East China Sea to demonstrate its displeasure. Lee's victory in the country's first democratic presidential election in 1996 brought more recriminations from China, as well as more missiles fired near Taiwan – a warning not to proceed too far along the road to independence.

In recent years, Taiwan has given up its claim to the Mainland, although China continues to insist upon its sovereignty over the island. Much to the Mainland's displeasure, many of Taiwan's leaders have expressed the notion the republic is now a separate entity from China, having its own democratic government. Taiwan also continues to press its case for inclusion in international organizations such as the United Nations and the World Trade Organization.

In January 1998, China offered to begin political talks about reunification with Taiwan. The island government quickly rebuffed Chinese officials, saying the Mainland had not given up on its demand that Taiwan to submit to the "one China" principle.

Still, talks did resume in the fall of 1998. In a dramatic end to a series of October talks, Chinese President Jiang Zemin met for the first time with Taiwanese ruling party official Koo Chen-fu – an event that marked the highest level contact between the two sides since 1949.

In July 1999, Taiwan surprised China by officially announcing that it had abandoned its "one China" policy. President Lee claimed that Beijing was using the term to undermine the legitimacy of the island's government. China reacted by bitterly denouncing the Taipei government and called for a halt to all activities aimed at dividing the "motherland." – Tim Ito, washingtonpost.com staffer